The Feds Want Your Retirement Accounts

Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts such as IRAs. Slowly, the cat is being let out of the bag.

Last January 18th, in a little noticed interview of Richard Cordray, acting head of the Consumer Financial Protection Bureau, Bloomberg reported “[t]he U.S. Consumer Financial Protection Bureau [CFPB] is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency’s first foray into consumer investments.” That thought generates some skepticism, as aptly expressed by the Richard Terrell cartoon published by American Thinker.

Days later On January 24th President Obama renominated Cordray as CFPB director even though his recess appointment was not due to expire until the end of 2013.

One day later, in the first significant resistance to President Obama’s concentration of presidential power, a three judge panel of the U.S. Court of Appeals in Washington DC unanimously said that Obama’s Recess Appointments to the National Labor Relations Board are unconstitutional. Similar litigation testing the Cordray appointment to the CFPB is in the pipeline.

The Consumer Financial Protection Bureau (CFPB) created by the 2,319 page Dodd-Frank legislation is a new and little known bureau with wide-ranging powers. Placed within the Federal Reserve, a corporation privately owned by member banks, the CFPB is insulated from oversight by either the President or Congress, its budget not subject to legislative control. It is not even clear that a new President can replace the CFPB director on taking office.

Unusual legal and political environments have a significant impact on the CFPB. With Cordray’s recess appointment in doubt several questions remain unanswered.

1) What will become of the CFPB when Cordray’s appointment is found invalid? An indicator comes from the NRLB, which operated unconstitutionally for years without a quorum. In 2007 the Senate threatened no NLRB nominations reported out of committee.

The NLRB continued operating with two members. Then a Supreme Court ruling in June of 2010 invalidated the NLRB decisions for lack of a quorum. Fisher & Phillips give the details about what was done next.

But recovery from the Supreme Court’s sting was quick, with Liebman and Schaumber still on the Board and with two new Members confirmed, … the suddenly full-strength Board simply added a new Member to the “rump panel” of the original decisions and managed to rubber-stamp many of the disputed Orders – at a record-setting pace – with the same result…

This may explain why President Obama renominated Cordray a year early. Once confirmed Cordray can rubber-stamp decisions made while he was unconstitutionally appointed. Otherwise those decisions will be invalidated.

2) What will the CFPB do with your money? The CFPB incursion into individual personal savings, in order to control how you invest your money, isn’t a new idea. Current proposals grew from a policy analysis as disclosed by Roger Hedgecock.

On Nov. 20, 2007, Theresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, presented a paper proposing that the feds eliminate the tax deferral for private retirement accounts, confiscate the balance of those accounts, give each worker a $600 annual “contribution,” assess a mandatory savings tax on every worker and guarantee a 3 percent rate of return on the newly titled “Guaranteed Retirement Accounts,” or GRAs.

How would that be accomplished? The Carolina Journal reported Ghilarducci’s 2008 testimony to Nancy Pelosi’s House.

Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts “including 401(k)s and IRAs” and convert them to accounts managed by the Social Security Administration.

Your Government universal GRA investment savings account is an annuity managed by Social Security. Hedgecock noted ‘[m]ake no mistake here: Obama is after your retirement money. The “annuities” will “invest” not in the familiar packages of bond and stock mutual funds but in the Treasury debt!’